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“Seeking Common Ground”

Second consultation meeting on options for structural measures to strengthen the EU ETS on 19 April 2013 in Brussels

Peter Botschek and Vianney Schyns

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Common Ground

All ETS sectors support emissions trading to achieve

agreed emission reduction at lowest cost; investment

decisions made based on ETS Directive rules

2020 target will be met; ETS carbon price reflects market

under the present rules; EU sectors have outstanding

effiency records; visibility and reliability beyond 2020; other

policies cause carbon costs (i.e. taxes and RES fees)!

Structural (longer-term) ETS Review for post-2020 is

needed - and scheduled in the ETS Directive. Problem:

None of the proposed interventions by EC solve ETS

structural flaws

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Common Ground

No global climate policy yet: No use in exporting jobs

and importing emissions (through products), i.e. as long

as EU acts in isolation

Global competitiveness = Resistance to carbon leakage:

ETS and entire "package" must safeguard/improve EU

competitiveness

European Parliament together with all ETS

manufacturing sectors reject backloading proposal.

Concern: Intervention increases EU carbon and energy

costs and adds further burden on EU consumers

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Common Ground

Coherent, sustainable (3 pillars!) Energy and Climate

policy "package" is essential: ETS is one tool but cannot

solve all issues; ETS manufacturing sectors represent only

some 20% of total EU emissions

Efficient EU manufacturing growth adds value, provides

employment and generates resources needed also for

low-carbon innovation; subsidy cost-shifting for expensive,

uncompetitive technologies towards ETS sectors removes

resources

No early global fossil energy resource depletion and

energy cost projections exaggerated: implications for

alternative energy sources' competitiveness

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New Ideas: structural and strategic

Structural improvements for ETS Review for after 2020

Dynamic Allocation based on actual production:

Actual instead of fixed (‘frozen’) historic production level

“True up” (s. Australian scheme)

Cap (‘total’) for entire economy, relative cap for industry

corresponding to actual growth

ETS visibility beyond 2020, therefore no «excess allowances» issue

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New Ideas: structural and strategic

Structural improvements for ETS Review for after 2020

New Entrants Reserve (NER) serves as allowances source for growth

and as sink in times of recession; NER left-over transferred to next

trading period (not lost, not auctioned off)

Benchmarks based on weighted average to avoid carbon leakage

Complementary unrestricted indirect allocation to provide

predictability and to avoid carbon leakage

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New Ideas: structural and strategic

Structural improvements for ETS Review for after 2020

Allocation based on actual production – why it solves current problems

a. No over-allocation, no excessive scarcity: no dramatic CO2 price

shifts

b. Must Enable efficient growth (current rules insufficient)

No underallocation for most efficient manufacturing:

=Cross-sectoral reduction factor and linear curve = threat

Not solved by proposed EC options!

c. Minimizes carbon leakage – in contrast to current ETS design

New ideas and cooperative approach appreciated:

Enabling efficient growth in Europe through holistic approach, flexibility and

convergence of ETS and EU and national policies with global developments =

strategic longer-term, scenario-proof